More big gold ETF purchases at start of ‘year of consequences’

The New York gold price closed Friday at $1,102.50 down from $1,109.30. In Asia it was moved to $1,104 but London pulled it back to $1,100 but the LBMA price was set at $1,104.70 up from $1,097.45 with the dollar index lower at 98.52 down from 98.82 on Friday. The euro was at $1.0895 up from $1.0882 against the dollar. The gold price in the euro was set at €1,013.95 up from €1,010.12. Ahead of New York’s opening, the gold price was trading at $1,103.15 and in the euro at €1,012.25.  

The silver price in New York closed at $13.93 down 37 cents.  Ahead of New York’s opening the silver price stood at $14.00.

Price Drivers

Friday saw purchases of 4.463 tonnes into the SPDR gold ETF and again a relatively massive purchase of 3.75 tonnes into the Gold Trust. The holdings of the SPDR gold ETF are now at 649.594 tonnes and at 160.17 tonnes in the Gold Trust.  These two purchases show a continuation of vigorous demand for gold by U.S. investors.

To really understand why gold is rising one has to step back and look at global financial markets and what’s happening there. 2016 may well become the “Year of Consequences” where the behavior of markets, central banks and the banking system with its burgeoning debt bears the fruit it was inevitably going to produce at some point in time. So far in 2016 we have seen huge, negatively directed, volatility in equity markets, not just in the equity casino in China, but in the developed world markets too. We expect that to continue as underlying problems come to the surface.

For gold and silver, bearing in mind that their prices are essentially a statement by only U.S. investors, their heavy purchases in the last month show their opinion on U.S. markets and U.S. financial problems. U.S. investors have seen that bond, equity market tops appear to be in and that global, debt problems could mature into global [including U.S. markets] financial crises in 2016 and beyond. With U.S. investors being the first to be positive in this world, what will happen in the rest of the world? It has to be worse than in U.S. financial markets. The E.U. is more than likely to see a repeat and worse of the Sovereign debt crisis as their recoveries splutter and die and debt servicing abilities prove inadequate. The impact on the confidence levels in the developed world will be very heavy as this is a repeat of what’s gone before. The efforts to stem the crises in the previous crisis must have failed, so another similar crisis could be insoluble.

 

Julian D.W. Phillips for the Gold & Silver Forecasters- www.goldforecaster.com and www.silverforecaster.com

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